Real Estate Group Buys G.M. Building

By RICHARD D. HYLTON

Published: February 15, 1991

One of the country's largest private real estate investment groups quietly acquired the landmark General Motors Building in Manhattan last month, people at G.M. said yesterday. The headquarters building was sold for $500 million plus other unspecified considerations, they said.

The 50-story building was acquired by Corporate Property Investors, the real estate investment trust that refinanced the property for G.M. in the early 1980's and in exchange received the option to acquire the building, on Fifth Avenue at the southeastern corner of Central Park, which opened in 1968.

To raise cash in the early 1980's, G.M. got a 10-year, $500 million mortgage on the marble-clad tower from the investment group at 10 percent interest, which was favorable considering that 10-year Treasury bills carried interest rates of 14 percent. At the time of the deal, it represented the largest mortgage ever put on a New York office tower. In exchange for the favorable interest rate, Corporate Property Investors got the option to acquire the property at the end of the 10-year period in exchange for the $500 million mortgage.

But at least one person at General Motors said the auto maker received additional considerations for the building. As a result of the transaction, which closed early last month, G.M. will record a special, one-time gain of about $600 million, but it was not clear what the additional $100 million represented.

Telephone messages to Hans C. Mautner, the chairman and chief executive of Corporate Property Investors, were not returned.

The Manhattan-based realty group, which was started in 1971, is one of the most successful real estate investors in the country. With about 21 million shares and about $3.4 billion in shareholders' equity, the investment trust, which is not traded publicly, has some of the nation's largest public and private pension funds as shareholders. A.T.&T.'s pension fund is believed to be the largest shareholder. In addition, it also has major foreign shareholders like the Kuwaiti Investment Office.

Its annual return to shareholders has averaged about 17 percent over the last 15 years. Originally, shares sold for $25 apiece but today a single share costs about $162. Dividends, too, have risen sharply, from about $1.90 for the first dividend to about $6.90 recently.

The group has a portfolio that is 80 percent large, regional shopping malls -- the best performing segment of the commercial real estate market at present -- with the remaining 20 percent in prime office buildings.